Chambal Fertilizer stock was seen on a strong up trend from July 2011, Selling pressure that we have seen recently in this stock was just due to profit booking and there is no reason at all to go short on this stock. Using technical analysis we see, this stock has a very good support at 89 level(Previous resistance for April 2011 which is now support level), also the 89 level on the chart is 61.8% Fibonacci retracement level of 118.45 High and 69.8 low. So this level can be an important technical level, also if we take a look at moving average (100 EMA) then on daily chart it again shows level near 89. So near term bottom must be 89 level and this is the time to buy this stock for short term based on technical analysis, targets must be 97 and then 103 levels. Strict stop loss must be placed by all traders just below 87 level on closing basis. High risk traders can buy CHAMBLFERT 100 Call Option at 1.6 level for 7 days target as 4.5 and then 5.5, Stop loss must be placed for this call option at 0.45 level. Risk reward ratio for this trade is excellent, therefore its worth taking risk in chambal fertilizer 100 call option. Another confirmation can the Open interest data, by analyzing open interest data we have seen unwinding of short positions in CHAMBLFERT futures on Friday’s trading session. Even today we have seen good amount of buying in this stock near 91 level, stock has recovered most of its early losses. On the charts we have seen that trading volume in last 2 weeks was much lower, hence this decline was on a lower volume. I wouldn’t be surprise to see this stock bouncing back towards 97 level in few days.
Chambal Fertilizer 100 Call Option: Buy CHAMBLFERT 100 Call near 1.6 level and hold it for 7 days, targets are 4.5 and then 5.5 levels. We would also advice traders to place the protective stop loss just under 0.45 level. This trade setup seem to be very attractive as risk reward ratio is more than 1:2.
Nifty futures at this point of time is trading very negative down by about 90 points. Also the discount has widen on nifty futures. We may see some recovery in nifty futures soon buy for intraday traders can go short on every bounce. Support for nifty is at 4800 and 4757 while resistance is at 4899 and 4945 levels.